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Luxembourg School of Finance

Towards a prosperous economy

 

 

Finance helps to channel capital to activities where it is best employed. This will lead to a more productive economy and a better standard of living for everyone. Unfortunately, there are severe obstacles in the process of allocating capital to its most productive uses. Problems occur because of asymmetric information (borrowers have better information about the quality of a project), liquidity mismatch (banks finance long-term projects but their funding is on a short-term basis), or the systemic instability of a financial system. Research in finance tries to understand the fundamental reasons behind these obstacles and how these problems can be addressed.

An example of the instability of financial systems was the recent financial crisis, which affected the global economy pushing the world into recession and causing mass layoffs in many countries. Scandals, bankruptcies and taxpayer bailouts of some of the biggest financial institutions led to an erosion of the confidence in today’s financial systems. Generally, financial crises threaten the wealth of nations, affect people’s well-being and have undesirable redistribution effects; therefore, it is in the public interest to ensure they do not occur and that their effects are minimised when they occur.

The Luxembourg School of Finance

The Luxembourg School of Finance (LSF) in the Faculty of Law, Economics and Finance of the University of Luxembourg combines thorough theoretical research with data-heavy empirical work testing implications of theoretical considerations. We view the financial crisis not only as a challenge for economic agents, but also as an opportunity for researchers develop a better understanding of financial crises.

The current research at the LSF is generally concerned with how capital is allocated, and thus investigates both the supply and demand side of capital. Capital is supplied by households through intermediaries such as banks and financial markets, by institutional savers such as pension funds, and by alternative investors such as hedge funds. On the demand side, capital is used by households (mainly for residential mortgages) and firms funding their productive activities.

LSF researchers investigate the behaviour of financial markets including their risks and the pricing of financial securities, as well as the behaviour of market participants, such as financial institutions and individual investors. The impact of regulation and law on the development of financial markets and on the behaviour of financial agents is also a focal concern. The LSF has has developed a particular expertise in alternative investments like real estate, art and venture capital.

Having initiated the Luxembourg School of Finance in 2002, the financial sector in Luxembourg strengthened its commitment to academic research by creating the Luxembourg School of Finance Foundation in 2006. The Foundation’s mission is to assist and support the Luxembourg School of Finance in all of its activities including research.

Contact: Prof. Jang Schiltz - The Luxembourg School of Finance (LSF)